House Telecom Bill Creates Federal Franchising System
The long-awaited House telecom bill got a warm reception from Bell companies, but net neutrality proponents Tues. called it a step backward for the Internet (see separate story in this issue). The bill puts net neutrality regulation in the FCC’s hands, but it specifically orders no rulemaking -- a provision critics say would limit the FCC’s enforcement power. Cable gave the bill conditional approval, praising progress from earlier drafts. The bill doesn’t include a buildout provision -- considered a key stumbling block in building bipartisan support on the committee.
Although the bill gained a bipartisan sponsor with Rep. Rush (D-N.Y.), House Commerce Committee Chmn. Barton (R-Tex.) drafted this version of the bill without the support of Ranking Member Dingell (D-Mich.) and Telecom Subcommittee Ranking Member Markey (D-Mass.). Talks broke down last week chiefly over the buildout provision, which Democrats -- and the cable industry -- had pushed to include. In cable’s favor, however, Barton dropped a uniform pricing provision and a requirement that cable couldn’t enter federal franchises until competitors reached 15% market penetration.
“This bill will produce an explosion of opportunity for American workers,” Barton said in a statement introducing the bill. Barton was set on drafting a bipartisan bill, and the deal he brokered 3 weeks ago included the 5 principals -- Dingell, Telecom Subcommittee Chmn. Upton (R-Mich.), Markey and Rep. Pickering (R-Miss.). That deal fell apart when House Republican leadership objected. But House Speaker Hastert (R-Ill.) praised the bill, saying it would increase competition, lower prices and encourage competition. Upton said the bill would provide a “variety of new services at a lower cost.” A hearing is set for Thurs.
Markey slammed the bill for weak net neutrality provisions and failing to include buildout, which he said would protect consumers from predatory pricing. The bill “represents an extraordinary rejection of the competitive and universal service principles that have guided successful telecom policy for decades,” Markey said. The net neutrality provision is a “body blow to the Internet community,” he said, favoring the “communications collosi at the expense of the public interest.” Dingell said 2 questions should be asked: Does the bill bring competition to all Americans and does it protect the Internet “as we know it today?”
Sen. Wyden (D-Ore.) criticized the bill’s net neutrality provision: “This legislation begins the construction of a multi-layered, toll-strewn information superhighway that is out of sync with what has made the Internet work -- access for all.” Wyden is pushing his own net neutrality bill (S- 2360), which would prohibit network operators from charging businesses for faster delivery of services.
Key Provisions
The bill’s national franchising authority would allow cable to switch from local franchising agreements. Certification of national agreements would take effect after 30 days or upon expiration of existing local franchise agreements. Federal franchises would need to be renewed every 10 years and could be revoked if the FCC decides that a service provider has violated rights-of-way or anti- discrimination rules. Franchise fees would be 5% of an operator’s gross revenue. Any new operator to a franchise area may apply for a federal franchise, and existing operators are eligible once a new entrant offers service in their area.
If no new operator enters a franchise area, existing operators would be eligible for federal franchises when their current agreements expire under 2 conditions: (1) There’s another cable operator offering service when the bill becomes effective. (2) The other operator is still providing service at the time the federal franchise is enacted.
States and local govts. maintain authority over public rights of way, and consumer complaints may be handled by the local franchising authority or the FCC. The bill contains an anti-redlining provision which says cable operators may not deny access to any group of potential subscribers based on income. If it’s determined access has been denied, the “Commission shall ensure that the cable operator extends access to that group,” the bill says, but enforcement is undefined. Rush had requested anti-bias rules in a letter to Barton (CD March 24 p1).
The bill also would require the FCC to enact rules ensuring that all 2-way VoIP services provide their customers with 911 and E-911 services. Entities that own or control E- 911 infrastructure would be required to provide access to it at “just and reasonable, nondiscriminatory” rates, terms and conditions that the FCC would determine. The bill also would grant VoIP providers rights to interconnection and exchange of traffic with ILECs. Finally, the bill would allow municipalities to set up their own broadband networks.
Bells Supportive
Cable thinks the bill represents “considerable progress,” said NCTA Pres. Kyle McSlarrow. “Earlier drafts of the House bill focused on picking winners and losers on the basis of technology, and we are pleased that focus has now changed,” McSlarrow said. A preferable policy would be to draft legislation that would “reform and streamline the franchising process to ensure speedy entry by new competitors,” McSlarrow said, but the “scheme proposed in the House bill seeks to ensure all providers compete on a level playing field.”
McSlarrow also welcomed the bill’s language on voice competition: “The only telecom monopoly today is the voice market,” he said, vowing to “build on the good start in the House bill to ensure that the voice market is fully competitive.” He said the bill shouldn’t address net neutrality provision, even though the bill’s provision is “narrowly tailored to the FCC policy statement issued in 2005.” Govt. shouldn’t interfere in the market, he said.
Bells welcomed the legislation. “The bill strikes the right note of accelerating video choice for consumers, while upholding the legitimate and important roles of local governments,” said AT&T Exec. Vp-Federal Relations Tim McKone: The committee is doing its part to bring “choice of video services to consumers.” Verizon is “still studying the bill to make sure it meets objectives important to consumers -- greater video choice; accelerated broadband deployment; and a free and open Internet, unfettered by government regulation,” said Peter Davidson, senior vp-federal legislative affairs. But he said the local franchise process continues to delay competition: “Where FiOS TV competes with cable, people are saving 28% to 42% a month.”
Passage of the bill would be “a leap forward in the way video is delivered to American consumers,” said BellSouth Vp- Govt. Affairs Herschel Abbott. USTelecom and Qwest also endorsed the bill.
But RCN, seeking more competition for cable programming, said it was “disappointed” in the bill. It “does not contain the important protection against predatory pricing,” Richard Ramlall, senior vp-strategic & external affairs, told us: “We will continue to urge that such protections be reinserted as the legislation moves forward in the House and Senate.”
Rocky Road Ahead
House passage of the bill is far from assured, according to 3 analysts. Barton’s legislation lacks the widespread support from House Commerce Democrats, said Medley Global Advisors’ Christopher Stern: “It seems to me that they've started looking for ways to make the road a little bit rougher than it already is.” Cable operators don’t appear to back the bill, despite McSlarrow’s tepid support, wrote Stifel Nicolaus’ Blair Levin. The bill isn’t “that onerous” to cable, said Levin.
Senate Commerce may be another roadblock if its bill differs significantly from Barton’s, said Stanford Washington Research Group’s Paul Gallant. “The biggest uncertainty now is how different the Senate bill will be,” said Gallant, a former FCC 8th floor aide, like Levin. “Odds are uphill, but there’s now a realistic chance of passage this year.”
The video bill would quickly become a target for amendments if it reaches the Senate, said analysts. “It’s going to be very difficult to keep this bill clean -- assuming it gets to the Senate, it will likely bog down,” said cable consultant Steve Effros. Potential snags include universal service provisions, a la carte legislation and indecency issues, he said: “History indicates that telecommunications bills tend to become Christmas trees.”